Economics and development

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In July, Addis Ababa will host a crucial summit on financing for development. If September’s summit on sustainable development goals (SDGs) in New York is when governments will decide what they want to achieve on poverty and sustainability by 2030, Addis is where they must set out how they will do so.

There’s much to do, with a bewildering array of potential issues on the table – aid, trade, tax, the private sector, climate, sustainability and technology transfer are all possible focus areas – and too little clarity on what success would look like on each. Politicians are not yet feeling pressure to make serious offers.

Yet, if Addis disappoints, the fallout could be extensive. Prospects for achieving the SDGs – such as ending poverty by 2030 – would dim significantly. Frustration among developing countries could feed in to the September summit and the December climate summit, threatening a cascading failure that could damage prospects for international cooperation on defining global issues for a decade.

How can we avoid this scenario and ensure that Addis is a landmark?

First, there needs to be a clearer narrative on what the summit is for, that focuses on three or four core areas. At least one of these needs to be about politicalimpact, with a big story that leads the next day’s news agenda. In practice, this probably has to be about aid – even though it now accounts for only around a 10th of development finance.

Other contenders could include a major push on addressing the “financing gap” faced by many middle-income countries, through scaling up official financing other than aid. And a strong focus on financing highly effective cash transfer schemes in lower income countries would go a long way towards ending poverty.

The Addis outcome could also help key “work in progress” agendas with longer term development impact.

One area where there’s plenty of buzz is the contribution the private sector can make – for instance, through scaling up foreign direct investment (the single biggest source of development finance), new public-private partnerships, or in key sectors like infrastructure. Less clear, though, is exactly how Addis may contribute.

Instead, a better candidate may be international tax cooperation – the most important thing that rich countries can do to help developing countries mobilise their own resources.

One step would be to spend more aid on developing countries’ tax administration efforts – an area with breathtaking rates of return. Faster progress on recovery of stolen assets from abroad is another priority for many developing countries, as is access to the automatic exchange of tax information that G8 and G20 countries have already agreed among themselves.

Above all, Addis could help close tax loopholes that allow multinational companies to report profits in tax havens – rather than where their workforces, assets or sales are. Country by country reporting requirements would be one important step; a unitary tax system would be even better.

Addis could put emerging issues on the development map by including these in the outcome document – even if the time is not yet ripe for agreeing concrete actions. It could put down a marker on the need to do more to tackle inequality, echoing the SDGs’ emphasis on the issue. Or, it could flag up the potential wins that would result from fair shares for developing countries in any future global emissions budget.

Most of all, Addis needs more agenda-setters to help its Norwegian and Guyananco-facilitators, and Ethiopian hosts, to champion its potential. UN secretary general Ban Ki-moon and World Bank president Jim Yong Kim could both do more. Germany and Turkey, hosts of this year’s G7 and G20 summits, could be key players too.

Addis needs more voices to make the moral case for why countries need to raise their game. Civil society has a crucial role here. And it may be that Pope Francis emerges as a leader, given his commitment to justice – and the fact that a papal encyclical on climate and development is expected soon.

Perhaps most of all, the summit will depend on commitments from finance ministers to attend (as IMF head Christine Lagarde has already done). They, far more than development ministers, have the power to unlock real progress.

Alongside last week’s Davos meeting has been a welcome focus on global economic inequality – but much less on gender inequality. Everyone agrees that women’s economic inequality is important, especially in developing countries, but change is agonisingly slow. The proportion of women working globally has fallen slightly since 1990. Just 2 per cent of bilateral aid is directed towards women’s economic empowerment, and that figure has barely increased since 2007.

You know that women’s economic inequality is a problem, but do you know how bad it is? (I didn’t). Only half of women participate in the labour market, compared with 80 per cent of men. More than half of all employed women are in informal vulnerable employment. Women still earn between 10 and 30 per cent less than men. All this adds up to a staggering US$9 trillion annual cost to women in developing countries due to their lower pay and lesser access to paid jobs than men. That’s more than the GDP of Britain, France and Germany combined. It’s that bad. Learn more here.

The ray of hope here is to think outside the box. Women need equal pay, equal opportunities and development finance for gender equality. But there are also other avenues.

A number one reason for women’s economic inequality is the vastly greater amount of caring that they do. They look after children, cook and clean, and care for anyone in the family who is ill or infirm. Women in developing countries devote up to three daily hours more to housework than men, and spend up to 10 times as long as men looking after others.

While we wait for the time when women and men all over the world share this kind of domestic work equally, other policies can support progress. Decent public services make a vast different to women’s care responsibilities. Hospital and clinics, schools childcare services and social care all play their part. Where these are absent, the work of making up for them falls – you guessed it – on women. Where public services are functional, women have a much greater chance of holding down decent jobs. The far more comprehensive public services provision in developed countries is one of the reasons why the gender care gap, while still real and present, is proportionately much smaller.

So to close the gender gap, an area not generally considered to be about gender may prove vitally important. Decent public services for all – and sufficient taxes to pay for them – could provide a big part of the solution.

It’s 2015, a year where global debate on development will be loud and active, with the new global sustainable development goals, the conference on how to finance them, and the important climate summit. However, having now been part of development debates for longer than I like to remember, I wonder whether these will be as broad and open as in the past, or whether they will be restricted to the issues more palatable to those who hold power, with a whole range of areas where the powerful also constrain development rendered unsayable.

2015 is also the 30th anniversary of Live Aid, the massive concert-fundraiser that placed a lasting spotlight on global poverty. A popular event not a policy prescription, the development of the Live Aid phenomenon perhaps mirrors the wider world.

The original Live Aid in 1985 responded to the famine in Ethiopia by raising money. It did not set out to look at the local or global causes of the famine – the musicians that heralded Live Aid were even called ‘Band Aid’, a brand of sticking plaster. Live Aid was much criticised for this (although my personal story is that it succeeded in propelling me from my teens onto a lifelong road of campaigning for global justice).

In 2005, opened with Paul McCartney singing “It was twenty years ago today…” came the even bigger follow up, Live Eight. By now things were different. The star-studded concert was explicitly not about raising funds – it was about putting public and political pressure on the forthcoming G8 meeting in Scotland to act on global poverty. The focus was not only on the role of developed countries in contributing aid, but also on how they could remove barriers to development, for example by cancelling unsustainable debts and by making trade rules fairer. It was about tackling problems underlying underdevelopment, rather than sticking a band aid over them.

And then, in 2014, came the Ebola epidemic – and a re-release of the original Band Aid track from 1985. The massive emergency response to Ebola is literally vital, of course. But there has so far been surprisingly little spotlight either on the reasons why the preventable Ebola epidemic happened, or on ensuring the same never happens again.

There is a similar trend in the wider development discussions. It is now generally assumed that developing countries must be in the driving seat of their own development, which represents enormous progress from the hung-over colonial mindset of the past. But we hear much less about the ways that the more powerful actors – whisper it – can sometimes get in the way of this development. Tax treaties that neuter poor countries’ potential to their fair share of revenue from investors are frequently agreed. Capital enters and leaves fragile countries on a whim. Harmful conditions are still attached to aid. Powerful countries still protect their own markets and block poor countries’ access to technology. Lenders are again allowing dangerous levels of debt to build. The kinds of dramatic actions needed to stem climate change are not even on the table.

These types of issues are barely present in the 2015 debates, let alone meaningful ways to ensure they are put into action. If 2015 is to bring the transformational change that everyone agrees they want, we need to rapidly rebalance the debate, and bring the unsayable back into the conversation.

Yesterday saw the launch of action/2015, the new global campaign on poverty, inequality, and climate change that will rally more than a thousand campaigning organisations around four crucial summit moments on these issues that will take place over the year ahead.

It’s the right campaign at the right time, because now more than ever, power is so distributed that only mass mobilisation and values change will be able to bring about the transformation needed – something I realised vividly during the profoundly disillusioning experience that was acting as the author of the UN High-Level Panel on Global Sustainability in 2011 (more on that sorry tale in the first couple of pages of this talk of mine from 2013).

In our forthcoming report for Tearfund – working title The Unfinished Jubilee: Towards a Restorative Economy – Rich Gower and I argue that three themes are especially important. You can sum them up in just ten words: A larger us. A longer future. A different good life.

1. A larger us

First up, we need to think less of “people like us” and more of “people – like us”. The whole sweep of human history is a story of expanding the size of the ‘we’ with which we empathise – from itinerant bands of hunter-gatherers to chiefdoms, from city states to kingdoms, and on to modern nation states and the staggeringly diverse communities of affinity and ethnicity in today’s globalised world. This expansion of empathy was perfectly captured by Martin Luther King in his 1963 ‘letter from Birmingham City jail’:

I am cognizant of the interrelatedness of all communities and states. I cannot sit idly by in Atlanta and not be concerned about what happens in Birmingham. Injustice anywhere is a threat to justice everywhere. We are caught in an inescapable network of mutuality, tied in a single garment of destiny. What affects one directly, affects all indirectly.

Above all, we need to get back to thinking in terms of the common good – and to do so at planetary scale, because in a world of global interdependence and planetary boundaries, only a 7 billion ‘us’ will do.

2. A longer future

Second, we need to face up to the fact that we’ve fallen out of the habit of thinking about the long term. Instead, our political leaders rarely have the luxury of thinking beyond the next election; our business leaders, the next financial quarter; our journalists, the next 24 hour news cycle. Scientist and author Danny Hillis observed in 1994 that:

When I was a child, people used to talk about what would happen by the year 2000. Now, thirty years later, they still talk about what will happen by 2000. The future has been shrinking by one year per year for my entire life.

In particular, there has been a catastrophic implosion of the implicit covenant between past, current, and future generations. Today’s young generation in developed countries face a far more uncertain future than their parents, with unaffordable housing, costly higher education and student debt, and the end of ‘jobs for life’. And globally, the next generation faces a future of steadily increasing climate change and resource scarcity – unless decisive action is taken now to prevent that from happening.

3. A different good life

Third, recent years have seen a wealth of research challenging the idea that material consumption levels have much to do with happiness, at least beyond a certain point. Surveys that measure people’s subjective wellbeing routinely find that the correlation between life satisfaction and income starts to break beyond a certain level of GDP per capita. Robert Kennedy recognised this nearly 50 years ago, when he observed that,

Yet the Gross National Product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything, in short, except that which makes life worthwhile.

So our stories need to focus on a broader idea of human flourishing, encompassing not only material security but also goals further up the ‘hierarchy of needs’ – such as friendship, family, a sense of connection, confidence, achievement, and the respect of others.

For more on the Tearfund project mentioned above, this presentation and this blog post, both from a couple of months ago, give an overview of some of the ideas we’re looking at.

Never have I seen such a wave of social media euphoria as the one that swept through my Twitter and Facebook feeds this time yesterday, as news broke about the US-China deal on climate change. But now that it’s the morning after, a few quick reflections.

China’s 2030 peak emissions date may be a big deal politically, but it won’t help the climate much. Since 2000, China’s carbon emissions from energy consumption have risen from 3 billion tonnes to around 9 billion tonnes today. They’ve tripled in ten years. China’s per capita emissions are now bigger than the EU’s (though still a long way off those of the US). So forgive me for not cracking open champagne at the news that China may be willing to taper off this unbelievable rate of emissions growth in another sixteen years. I admit that the 20% renewables target is a big deal – right now China’s at about 7% – but even this still leaves plenty of space for emissions to rise as energy demand and coal capacity continue to grow.

On the US side, too, all the hype about a 26-28% cut below 2005 levels by 2025 strikes me as overdone. Obama had already committed to 17% below 2005 levels by 2020. He made that announcement five years ago, at Copenhagen. So 26-28% by 2025 does no more than more or less extrapolate that forward another five years (in fact, as Maarten Hajer at PBL points out, yesterday’s commitment is actually a little less ambitious than the forward curve implied by the 2009 promise) – there’s no actual ratcheting up of ambition.

The policies and measures unveiled in yesterday’s US-China announcement are awfully thin. There’s a “renewed commitment” to technology cooperation, with no funding numbers attached. Some stuff about a demonstration project on carbon capture and sequestration, which people have been talking about for over a decade now – it’s starting to sound like nuclear fusion. More cooperation on reducing HFC emissions, which do have massive global warming potential, but are incredibly easy for China to reduce – cynics like me think that China was actively inflating them so as to score Clean Development Mechanism permits, and is only now talking about a phase out because demand for CDM permits has collapsed along with EUETS prices. There’s a “climate smart low carbon cities initiative” which is basically a plan to convene a summit. And that’s pretty much it.

It’s kind of amazing how European progressives coo about anything China does on climate, but give Europe and the UK zero credit for the vastly more impressive lead they’ve taken on climate change. There was a particular classic of the genre yesterday in an extraordinary blog post on LabourList by Sunny Hundal that called the targets of the US (which work out at 16% below 1990 by 2025) and China (emissions can rise for another 16 years) “historic” while slating the EU (40% below 1990 by 2030) as – get this – “weak and lazy”.

Even more breathtakingly, the post was entitled “It’s time Labour joined the world in fighting climate change”, without at any point mentioning the small matter that Labour passed legislation – so far retained by the Conservatives – that (a) commits the UK to an 80% emissions reduction by 2050, (b) frames this in terms of a legally binding carbon budget, and (c) mandates an independent Climate Change Committee – of scientists, mark you, not politicians – to monitor progress and advise on whether the carbon budget needs to be tightened. (“Where is Britain? Nowhere”, the post concludes.) Would that the world followed Britain’s lead by setting a global carbon budget, and creating an independent monitoring body.

On which note – regular readers will have seen this coming several paragraphs ago – this is still, as it always has been, about the need for a global carbon budget, which (as usual) no-one is talking about. Instead, the UNFCCC process lumbers on, with its usual focus on something called “momentum” (whatever that is) as opposed to actual results. Not one person I know in the UN process expects Paris to agree a global plan for limiting warming to 2 degrees. Not one.

I was talking last night to a veteran climate negotiator from a developed country government, who observed that the climate priesthood has, for years, been having far too nice a time meeting up every six months for drinks and per diems. No one wants the party to end. There is no sense of urgency. No real deadline. She’s absolutely, 100% right. I started going to UN climate summits when I was a student. Next summer I’m 40. And the conversations in Warsaw last winter had basically not moved on since the first one I went to in the Hague a decade a half ago.

The only way this will ever end, she continued, is if policymakers give them six months to work out a solution, and make clear at the outset that at the end of this period, they can all piss off home. For good. She’s right about that too. This is what they should agree, on a full global basis. I’m really not sure what else there is to say.

Updated: news is just emerging that there are some flickers of discussion of a carbon budget in the UN process. This has the potential to be a much bigger deal than the US-China announcement – more on this later.

Here’s a conundrum if you like riddles: how on earth is next summer’s Finance For Development summit in Addis Ababa supposed to take account of the vexed issue of reform of international financial institutions?

On one hand, the issue is almost impossible for the summit to ignore. IFI reform is a key ‘systemic issue’ in financing for development, and one that figures prominently in the Monterrey Consensus that emerged from the first FFD summit over a decade ago.

On the other hand, though, what exactly can governments say about the issue? An IMF reform package has already been agreed, after all – the problem is that it’s logjammed in the US Congress, and the results of the midterm elections have done nothing whatsoever to change that.

But what if, at Addis next July, European governments made a formal declaration that the next Managing Director of the IMF should be from a developing country – preferably, but not necessarily, matched by a declaration from the US that the next President of the World Bank should also be from the South? (Christine Lagarde’s five year term ends in July 2016; if Jim Kim also does a five year term, as Robert Zoellick did, then he would be due for replacement in July 2017.)

This declaration wouldn’t cost the EU (or US) any expenditure. It wouldn’t require approval by their legislatures. But it would send a real statement of seriousness about IFI reform by overturning the conventions of a European to run the Fund and an American to run the Bank.

Moreover, it would also be an outcome from the summit that would lead the front page of the Financial Times and Wall Street Journal the following day – something that wouldn’t happen if the key summit outcome is (say) better targeting of ODA, or a new investment facility of some sort.

The key likely objection to the idea is that it would be at odds with the idea of merit-based appointments. I take that objection seriously, and especially agree that it would be essential to avoid the posts of IMF MD and World Bank President becoming subject to regions ‘taking turns’, as they already do on the post of UN Secretary-General.

But on the other hand, the EU and US already had positions saying they supported merit-based appointments before the last appointments to these jobs, and then promptly put forward Lagarde and Jim Kim – which didn’t exactly make them look open to breaking with tradition.

The political bottom line here is that IFI reform is one of the few issues within the post-2015 ‘means of implementation’ agenda that the BRICs actually care about. And the BRICs are already showing their frustration at the glacial pace of change with the creation of their new BRICs Bank.

If governments have nothing to say on IFI reform at Addis, then there’s a real risk that it’ll look like they’re simply giving up on the reform agenda. But by sending a strong message about continued commitment to change in spite of the awkward squad on Capitol Hill, the EU and US could take a big step towards changing the difficult political mood on post-2015.

Tearfund has always been one of my favourite civil society organisations – above all because they have such a great track record of being a ‘pathfinder’ for other NGOs. They had climate change as a top campaigning priority long before most other development NGOs had really started to engage with it, for example. And now I think they’re about to do it again – with some deeply exciting work they’re doing on their future advocacy and campaigning strategy (which I’m involved in as a consultant).

Tearfund’s starting point in this work is a pretty radical one for a development NGO: a recognition of the basic paradox that the more the world succeeds on development, the more it fails on sustainability.

It’s a point we see most vividly in the fact that those countries deemed to have finished this process we call ‘development’ – developed countries – are also those with the highest per capita environmental impact. But you can see it as well in the fact that those countries that have seen most poverty reduction in recent decades are also the ones where emissions have risen fastest; China’s per capita emissions are now higher than those of the EU, for instance.

One purpose of their ‘Horizon’ project, then, is to start imagining what it would look like for us to move to an economy that was both just and sustainable – at all levels, from global policy right down to what it would mean for individual families. (You can read a background think piece that sets out some of our early thinking and ideas here – n.b. it really is just a think piece, and not in any way a statement of Tearfund policy.)

At the same time, the project also has a second purpose: exploring the new kinds of influence and change that will be needed to unlock change on this scale. Tearfund have recognised very candidly in their internal thinking that traditional ‘insider’ lobbying strategies will have limited power here. (Having spent the past ten years trying to support change in the multilateral system, I’ve reached a similar conclusion myself.)

Instead, alternative approaches will be needed – ones that propagate different norms, built new kinds of movement, create new coalitions for change, and use environmental, social, and economic shocks to fuller effect.

To help get this process underway, we ran a couple of fascinating conversations in London last week with various leading thinkers from government, think tanks, other NGOs, and business. Oxfam’s Duncan Green, who participated in one of the events, has written up a blog post with some reflections here. I distilled some of my own take-aways in a talk I gave at Tearfund after we’d run the two conversations, which you can read here.

Update: Green Economy Coalition’s Emily Benson, who took part in the other event from Duncan Green, has blogged her reflections on the conversation here.

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